Accountants not pursuing a limited or full Australian financial services licence need to realise they will have no discretion in relation to providing advice after the accountants’ exemption is removed on 1 July 2016 and risk being sued if they do give advice.
Institute of Public Accountants (IPA) technical policy general manager Tony Greco said there was an existing issue with accountants providing financial advice, particularly in relation to setting up an SMSF to leverage property.
Greco said he knew of an accountant currently being sued for giving advice.
“Most of you should be aware that the accountants’ exemption only applies to the setting up or closing down of an SMSF – it does not give you a carte blanche exemption to provide financial advice,” Greco told the IPA Victoria Congress in Healesville last Thursday.
“They’re still [trying to establish] whether financial advice was provided and the accountant can claim it’s hearsay, but verbal advice is just as sticky as written advice if it can be proven.
“It’s unfortunate for this particular person and they’ve realised that professional indemnity insurance does not cover financial advice; they’re on their own.
“So be mindful of the accountants’ exemption as it does not give you an authorisation to provide advice – that’s the message.”
He also stressed that once the exemption kicked in, licensed accountants needed to recognise their responsibilities required them to go beyond the standard setting up or closing down of an SMSF.
“When the regime comes in you’re going to have to prove to the client that it’s in their best interest and you’re going to have to do a statement of advice,” he said.
“Compared to what is in operation now, as unlicensed practitioners, you simply follow clients’ instructions – you don’t have to show that it’s in their best interest and you have a mild obligation.
“[For example], you’d tell the client if you don’t think this is a good idea because they will have a single asset in a fund with no diversification or there are restrictions on liquidity, so when the accountants’ exemption ends, you cannot simply set one up without proving that it’s in their best interest.”
